Is the Price Right? The iPad Does Not Exist in a Vacuum
By Rebecca McPheters
Media Industry Newsletter
May 3, 2010
Last week, I wrote of three critical questions that publishers need to address as they develop their iPad business models: (1) What is the competition? (2) Who benefits from this new platform, and how? (3) What is the role of advertising? The answers to each of these are integral to my overall message that the iPad does not exist in a vacuum. This week, I conclude this series with the fourth question: Is the price right?
Although iPad editions of magazines offer unique consumer advantages, their value will still be perceived largely in relation to their other forms. This is true even if the business model is one in which there is limited advertising support. Publishers need to establish pricing for their iPad versions that reflects this reality. Individual issues should be priced lower than their newsstand analogs and should not be priced higher than their Kindle versions. (We are dismayed that the otherwise outstanding Kindle iPad app allows for easy transfer of books, but does not currently allow use with periodicals.)
However, it is less easy to say that the iPad subscription price should be lower than that for print, because so many publishers lose money on their subscriptions before ad revenues are taken into account. Savvy consumers recognize that their artificially low subscription prices are often subsidized by advertisers.
To avoid undermining the revenue-generating potential of this new device, smart publishers will consider adopting models similar to those pioneered by The Economist and, more recently, Rolling Stone, and move online content behind a pay wall. They will evaluate the economics of migration strategies designed to move traditional subscribers to electronic versions and may eventually elect to increase the subscription prices of their print versions to be more reflective of the higher costs of fulfillment.
For advertisers, the superior demographics and potentially higher engagement levels of iPad readers justify higher CPMs–but the disparity between the readers per copy of print products and the iPad will be jolting and perhaps exacerbated by audience measurement systems.
The ongoing and exponential expansion of consumer opportunities to avoid advertising should strike fear in the hearts of advertisers everywhere. The fact that magazine advertising is often a valued component of content should make magazines increasingly desirable for advertisers relative to other media, regardless of how they are delivered to consumers.
Rebecca McPheters, the former New York Times Magazine Group group executive and Simmons president, now heads McPheters & Company. The company specializes in strategic planning and research for brands and for companies in media-related fields, including media owners, advertisers, and ad agencies. She can be reached at RMCPHETERS@MCPHETERS.COM.
